Hospital cost-cutting time

If this didn't already start in your hospital three months ago, it will start soon enough. In order to survive the coming year or two of increasing bad debt, increasing charity care, other reimbursement cuts, declining elective surgery volumes, more complex delayed-care stuff showing up in the ER, and decreasing philanthropy, it is time for the serious business of cost-cutting.

What is your hospital planning? Where do you look first to cut costs? The real question is, where do you look that you haven't already?


record number of hospitals laid off at least 50 workers in 2008, though the actual number (10,000) won't hit the 2005 record of 13,000. I expect 2009 to be just as bad, if not worse.

Are there other ways to cut significant costs without across-the-board layoffs? Here's a few ideas to stir the pot. Once you've read these, feel free to add some of your own ideas.

1. Audit your energy costs.
There is a surprising amount of wasted energy within hospitals, and a quick energy audit (some companies do this for free) can reveal how much you save by reducing waste, cutting lights, better insulation, etc. Doesn't sound like much, but it adds up, and makes your hospital greener. Harpo Studios (Oprah) saved millions per year after their audit.

2. Monitor your ER.
Get ready for a lot more complex CHF patients showing up in your ER. I've heard of some hospitals that are targeting these specific patients with aggressive home care plans to avoid those costly re-admits.

3. Find the fat in those big profit centers.
So many times, it's those money-making machines (you know which departments I'm talking about) that may have the most opportunity to improve. With so much profit rolling through every year, there is typically very little pressure to cut costs. Sometimes, that also leads to cost and process improvement complacency. No, you don't want to bother the money-makers, but this market will spare no one.

4. Share the savings.
Is it time to work with payers on those P4P cost savings opportunities? Or how about splitting the savings with physicians who decide to use the less expensive equipment (that has no impact on quality, of course)?

5. Apply leverage on vendors.
It may be time to re-evaluate some of those procurement agreements. Strategic vendor relationships can be strengthened even more during times like these. Other vendor relationships can potentially be leveraged for further cost savings.

6. Invest to save.
There are many opportunities out there that take some money to save even more. For example, it is quickly becoming a best practice for Fortune 500 companies to employ health coaches. Studies seem to indicate a vastly positive ROI as the employees improve their health and reduce healthcare costs. Couldn't hospitals do the same? Or maybe it's time to automate processes that currently are manual.

These are just some ideas to get the ball rolling. Of course, any time we talk about cost cutting, we have to be extremely careful that quality is not impacted. Also, cutting the wrong things could produce long-term issues, even though we get a short-term fix. Most importantly, cost cutting impacts real people's lives and livelihoods. Be careful out there, it's a jungle.

Most good hospitals will already have turned over most of these rocks and cut out the obvious fat. This next wave of cuts will take some real creativity.

What cost cutting measures is your hospital going after? I would love to get some sort of "Top 100 ideas to cut costs at your hospital" list together. Send some ideas in and we can learn from one another.